Do you buy out of your State or in your back yard?
Now, I’m always told that RE investing works anywhere. And to some degree, that’s true. However, what is not mentioned that not ALL types of investing work anywhere.
For example, someone who wants to invest ‘SUBJECT TO’, by taking over payments from owners who have zero to little equity in their homes, must realize that they will have a much harder time finding these ‘upside down’ owners in older neighborhoods, where most residents have their loan balances paid off or just about paid off.
Rehabbing would probably be a better strategy to pursue in OLDER, more established neighborhoods.
However, here is another problem. In the area where I'm from (Chicagoland), the market is pretty much saturated with investors or investor wannabe's (like myself). This influx of cash and buyers is good, on one hand, as you are almost guaranteed to sell a house at or above the Fair Market Value (FMV). However, the negative side is that even a house that needs 10K in work/updates will sell for the FMV or slightly below as well. So the investor gets outbid by newbies and potential homeowners.
Now, I’m into rehabbing myself. I’d like to be able to turn an ugly house into a beautiful home and make a nice paycheck doing that. So what should I do?
Should I just go after foreclosures, expired listings and other motivated situations in my hot market or should I look into cooler markets elsewhere (within 90 miles of my home, where rehabs are still Listed on the MLS close to 70% LTV, or better)
Now, another issue in hot markets is that the rents don’t match the mortgage payments, unless you go with the 1-5 year balloon, interest only mortgage, and even then, your cashflow is minimal (100-200/mo), so if a tenant trashes your home, you’ll be hurting pretty bad.
On the other hand, the cooler markets have rents that exceed the mortgage payment (which baffles me, as I think why would anyone rent if they can own for less?). For example, 60K home on the MLS rents for $700/mo. So, if I find a home that is cheaper, my cashflow will be better in case I can't sell it quickly AND my loan will be fixed for 30 years.
So… question for your pros. If you live in a hot seller’s market, like mine, do you invest elsewhere or do you look for deals in your own back yard?
Sorry for writing a book and I appreciate any feedback you provide.
Regards,
Vlad Realtor-Investor
www.VladSellsHomes.com